China Tightens Auto Safety Rules as Car Market Slumps, Non-Tariffs Used to
Stop Investment in Sector
Vice-minister says that to ensure safety,
new technologies that fail to pass stricter approval procedures will be barred from
market
·
Nationwide quality campaign: China is
launching a one-year inspection campaign covering smart-driving systems,
vehicle design and overall safety.
·
Stricter approvals: New
vehicle products and technologies will require tougher testing and
verification before entering the market.
·
Safety concerns rising:
Regulators acted after a series of accidents and growing consumer complaints,
particularly over autonomous driving and EV batteries.
·
Xiaomi SU7 crash: Three
people died in a March 2025 crash in Anhui involving a Xiaomi SU7 while
its driver-assistance system was operating. The system reportedly issued a
takeover warning just two seconds before impact.
·
Greater regulatory oversight:
Authorities will strengthen monitoring of automakers’ vehicle designs and
production processes to protect consumers.
·
Innovation vs. quality:
Regulators are seeking to shift manufacturers’ focus from adding increasingly
sophisticated features toward reliability, quality and safety.
·
Intense competition: China
has nearly 100 carmakers, many launching similar high-tech models,
creating severe price competition and eroding profitability.
·
“Involution” problem: UBS said
constant model launches and price wars have become an “enemy within” for
the auto industry, making sustainable growth and profits difficult.
·
Overall car market weak: Mainland
China’s car deliveries fell 20.9% year-on-year in July to 1.46 million units.
·
EV sales declining: EVs
represented 65.1% of July sales, but volumes fell 3.9% year-on-year,
extending the decline to the seventh consecutive month.
·
January–July EV sales: Domestic
EV deliveries reached 5.67 million units, down 12.5% year-on-year.
·
Demand pressures: The
market is being affected by weaker consumer demand and fading government
incentives.
·
Potential impact: Tighter
regulation may cause some consumers to delay purchases and could
increase compliance costs and slow the introduction of new automotive
technologies.
Bottom line: China is
tightening oversight of its rapidly evolving EV and autonomous-driving sector
as safety concerns, price wars and weakening demand expose growing
vulnerabilities in the world’s largest auto market.
China’s
shrinking car market has received another reality check as regulators step in to
police the hi-tech offerings that carmakers use to drive sales.
A
nationwide inspection campaign assessing the quality of Chinese-made cars that was
announced this week would see some consumers shelve purchase plans, exacerbating
a bearish outlook for the country’s auto sector, dealers and analysts said.
Vice-Minister
of Industry and Information Technology Xin Guobin told
a news conference in Beijing on Wednesday that new auto products and technologies
would be barred from entering the market unless they passed stricter approval procedures.
“Some
reckless innovative designs were installed in vehicles without sufficient testing
and verification,” Xin said. “Several incidents attracted public attention due to
concerns about the cars’ quality and the safety of autonomous driving technology.”
The
ministry announced on Thursday that a one-year campaign to review smart driving,
product design and the safety of cars would begin soon.
“Several
accidents and growing consumer complaints have spurred the regulators into action,”
said Gao Shen, an independent analyst in Shanghai. “With improved oversight, carmakers
will have to shift their focus from making their vehicles more intelligent to ensuring
quality.”
Three
people died in March last year when the Xiaomi SU7 they were travelling in crashed
in central China’s Anhui province while its driver-assistance system was operating.
The preliminary self-driving system alerted the driver to take control just two
seconds before the electric vehicle (EV) crashed into a barrier at high speed.
The
crash prompted Chinese authorities to tighten their oversight of early-stage autonomous
driving technologies.
Xinhua
reported last month that a rising number of complaints about EV battery quality
had been received by various public information platforms this year.
Xin
told reporters at Wednesday’s news conference that those issues were serious and
could not be ignored. He pledged to enhance monitoring of carmakers’ designs and
production to safeguard consumers’ interests.
Analysts
said China’s carmakers and automotive suppliers were at the vanguard of EV technology
and production, buoyed by government support and consumer appetite for innovation.
Nearly
all of the roughly 100 carmakers in China have been developing new technologies,
such as self-driving systems and digital cockpits, to lure consumers in the world’s
largest automotive and EV market.
But
Paul Gong, head of China car research at UBS, said intense price competition amid
the constant rolling out of new models had become an “enemy within” for the country’s
auto industry.
Dozens
of carmakers with similar products were embroiled in “involution” as they fought
for market dominance, he said in May. The term refers to intense competition that
erodes sustainable growth and makes profits elusive.
Overall
car deliveries in mainland China, including petrol-powered vehicles and EVs, plunged
by 20.9 per cent year on year in July to 1.46 million units, data from the China
Passenger Car Association (CPCA) showed.
EVs
sales, which accounted for 65.1 per cent of last month’s total, fell by 3.9 per
cent year on year, extending their decline to a seventh consecutive month as fading
government incentives and weaker consumer demand weighed on the market.
Between
January and July, Chinese carmakers delivered a total of 5.67 million EVs to domestic
customers, down 12.5 per cent from a year earlier, according to the CPCA.